TESTIMONY OF REPRESENTATIVE JOHN MARTIN MAINE HOUSE OF REPRESENTATIVES (WITH BACKGROUND INFORMATION FROM RON SNELL, NCSL) ON BEHALF OF THE NATIONAL CONFERENCE OF STATE LEGISLATURES REGARDING BIENNIAL BUDGETING IN THE STATES BEFORE THE LEGISLATIVE PROCESS SUBCOMMITTEE MARCH 2, 1994 Mr. Chairman, members of the Committee, it is my pleasure to appear before you this morning to discuss the merits of a Biennial budgeting schedule. I am John Martin, former Speaker of the House of the state of Maine and a past president of the National Conference of State Legislatures. On behalf of NCSL, I would like to thank you for the invitation to speak to this issue, and share our experiences with this type of budget schedule. Maine is one of twelve states that has an annual legislative session but has a Biennial budget process. Seven more states have Biennial legislative sessions and Biennial budgets. I can say without hesitation that having a biennial budget works for us. We feel that it provides us with a greater opportunity to review the programs and operations of the government in the second year of the biennium. We do have a supplemental bill for the second session of the biennium that we use to make adjustments based on revised revenue estimates and we fully expect that there will be adjustments that need to be made. In Maine, the Governor is constitutionally required to submit a balanced budget to the Legislature. We rely on executive branch revenue estimates to forecast the amount of money required to pay for the continuation of currently authorized programs, as well as any new initiatives or revisions that the Governor wishes to propose. The state budget officer is appointed by the Governor and has the final authority over the revenue estimates. During what amounts to be a five month legislative process (January through June), the estimates are usually revised and the biennial budget is negotiated and reviewed through joint hearings of the single appropriations committee and the various relevant "policy" committees. The major benefit of having a biennial budget is that we have the opportunity to spend more time on the review of program operations and special studies in the second year of the biennium. We do not waste time starting from scratch on the basic operations of government: personnel, travel, maintenance, etc., and can make minor adjustments based on caseload increases without going through a whole debate on the merits of the program. We've committed to a basic course for a longer period of time. The second-year, or supplemental, bill can amount to as few as twelve or fourteen pages of minor technical adjustments to meet revised revenue estimates. We can act to roll over surpluses if the revenue exceeds the estimates as well. This is not to say, however, that the second year is always that easy. There is certainly the potential for the second year supplemental bill to become difficult, especially if the economy is troubled, as it has been in our state for the past few years. Like most other biennial budget states, our second year debates can take on the dynamics of the primary budget battle if the cuts we need to make are particularly deep. Included with my written testimony is a background piece on state experiences with biennial budgeting that a member of our NCSL staff wrote in preparation of testimony before the Government Operations Committee last Fall. It includes more details on the ways in which other states operate under a biennial budget process. The summary of that testimony indicates that the collective state experience would show that a shift from an annual to a biennial budget could have some positive effect on your time and energies, as well as the executive branches time in preparing the budget, but that you would have to rely to a greater degree on revenue estimates and assume, as we do in Maine, that you will have to address adjustments in the second year of the biennium. My understanding is that none of the members of this subcommittee are from states that have biennial budgets and annual sessions, so I would be happy to stop here and answer any questions that you have about how the process works in practice rather than theory. But, in conclusion, Mr. Chairman, I would say that as with most other states that have biennial budgets, I believe that shifting the focus away from the often contentious budget battles in the second year affords us more time to review the operations of the government and devote more in-depth study to the more difficult problems that we face. ANNUAL AND BIENNIAL BUDGETING: My name is Ron Snell. I appear before you today as the Fiscal Program Director for the National Conference of State Legislatures (NCSL). NCSL represents the nation's 7,481 state legislators as well as lawmakers in U.S. territories, the Commonwealth of Puerto Rico and the District of Columbia. I am pleased to have this opportunity to add information from state experiences with annual and biennial budgeting to the Congressional review of the budgeting timetable for the federal government. The trend among state governments for the past 50 years has been to abandon biennial budgeting for annual budgeting. Forty-four states practiced biennial budgeting in 1940. Only 19 do so now, and at least half of them carry out a thorough review of their budgets before the second year of the biennium begins. There have been several reasons for the shift to annual budgeting, but in general the shift has been part of the resurgence of state legislative power since the middle of the century. In 1940 only four state legislatures held annual sessions; now 43 do so. Annual sessions make annual budgeting possible, but also reflect the growing activism of state government. Some states shifted to annual budgets in the 1970s to provide a quicker response to the rapidly expanding federal domestic spending of the period. Another reason has been to allow budget revisions in the face of fluctuating revenues as states have become more dependent on revenue from income taxes. State changes have not moved in only one direction, however. Connecticut, for example, in 1991 returned to biennial budgeting, reversing the decision it made to go to annual budgeting when the state shifted to annual legislative sessions in 1971. A few states have moved from annual to biennial budgeting over the past 20 years or have changed back and forth, in some cases as a byproduct of party politics, but in other cases from uncertainty as to which worked better. As this testimony will show, state experience does not make a clear case for the superiority of either biennial or annual budgeting over the other. We have been asked to comment on each of the issues listed below. The comments that follow do not constitute a formal policy statement of the Conference, which has not adopted policy on this issue. 1. 2. 3. 4. 5. 6. The budgeting practices of the various states, including trends Significant differences or variations among the states utilizing a Advantages and disadvantages of a biennial budget cycle for The consequences of a biennial budget cycle for predictability The ability of governors and legislatures to respond to The likelihood and consequences of increasing reliance upon 1. The budgeting practices of the various states, including trends toward and away from biennial budgeting. Annual budgeting is more common among the states than biennial budgeting; 31 states have annual budgets and 19 enact biennial budgets, most of them in the form of two annual budgets enacted at once (see table 1). Because the appropriations (as opposed to the budget) are made for a specific fiscal year in almost every case, and because 12 of the states with biennial budgets have annual sessions in which they can and do revisit the budget, table 1 may overstate the extent of true biennial budgeting. The extent to which budgets are actually revised for the second year of a biennium varies from state to state and from time to time. Economic conditions are an important consideration. As already noted, the long term trend has been for states to move to annual budgeting. Population growth seems to have affected the process. In 1993, only three of the 10 largest states--North Carolina, Ohio, and Texas--have biennial budgets. Among them, Texas alone has regular biennial sessions of the legislature. |